New Export Orders Stabilizes Turkish Output in August
The seasonally adjusted HSBC Turkey Manufacturing PMI showed manufacturing output in the country has maintained its level compared to a month ago as lower new orders offset modest increase in export orders.
New orders decreased for the third time in the past four months, although the latest reduction was only marginal and slower than that recorded in July. Manufacturers in Turkey reported that difficult market conditions had been behind the contraction.
New export orders increased, however, as companies indicated that they had made a concerted effort to generate sales in export markets.
With new orders decreasing, firms worked through outstanding business again in August. The pace of depletion was solid, but slowed to the weakest since February. Backlog depletion and capacity expansions led to a stabilisation of production during the month.
Output was broadly unchanged, following a decrease in July.
Part of the improvement in capacity was generated by a further rise in employment at Turkish manufacturing
firms. Staffing levels have now increased in each of the past 39 months, although the rate of job creation
remained only modest in August.
In line with company expansion plans, Turkish manufacturers raised their purchasing activity, although the pace of increase slowed. Higher input buying has now been recorded in three successive months.
A further increase in input prices was registered, extending the current sequence of inflation to 39 months. Although the rate of inflation quickened in August, it remained weaker than the series average.
Where input costs rose, respondents signalled higher raw material prices, while some noted increased import
costs as a result of unfavourable exchange rate movements. Meanwhile, firms left their prices charged unchanged over the month, following a slight fall in July.
Suppliers’ delivery times lengthened for the seventh month running in August, albeit at a reduced pace. Some respondents indicated that low stock levels at vendors had led to longer lead times.
Stocks of purchases, meanwhile, decreased at a solid pace. The reduction in pre-production inventories was the first in three months. Stocks of finished goods also decreased. That said, the pace of depletion was
Melis Metiner, Economist at HSBC, said: “Between June and July, both industrial confidence and capacity utilisation were near unchanged in Turkey, while August saw a more pronounced deterioration in industrial confidence.
“In August, input prices rose at a faster pace for the second month in a row, with participants referring to the higher cost of chemicals, copper and wheat in particular. Output prices were unchanged during the month. Input inflation is likely to rise further in Q3, if both agricultural commodity and energy prices continue to climb. This could put pressure on producers’ margins: domestic demand is clearly losing pace, so producers may not have much room to pass on rising costs.”